Someone wise once said, “Rules are not necessarily sacred; principles are.” For the entrepreneur with a maverick bent, this might sound appealing. But mavericks, although they are known to make pots of money given the right conditions, also have the unfortunate habit of running into difficulties with lawmakers; if you want your business to survive, playing by the rules is sometimes the smartest thing you can do. There are certain laws that have to be followed if you want to operate certain kinds of businesses.
Take, for example, the application for a trading licence. You have dreams of opening your own restaurant but before you don your chef-cum-businessperson’s hat, you have some admin work to do.
To secure a business licence for any of these activities, you need to apply to the Licensing Department. You will be required to submit reports from the town planning, health and fire departments, all of which may need to inspect your intended premises for zoning, type of business activity, health and fire regulations. If you intend building or altering premises for your particular business, you will also be asked to submit your proposed business plan or how you intend to make alterations to existing premises.
The Health Department will ensure that the premises are hygienic and clean in accordance with the stipulations made by the Health Act while the Fire Department will check that the premises comply with fire safety regulations. Town Planning checks that the geographical area is zoned for business (see below). Once all these authorities are satisfied, the council can issue you with a licence. It is entitled to inspect your premises and if your business changes owners, premises or activity, then a renewal licence is required.
The Home Office
But what if your business does not fall into any of the categories mentioned above? You want to open a simple consultancy, for example. You start out on your own, as so many entrepreneurs do, at home in your spare room. No inconvenient trading licences to worry about. As you take on some support staff, you hire your first few square meters of office space. Times are good and suddenly your new business is legit and firing on all cylinders. Clients are happy, word of mouth has taken care of your marketing and you’ve had to take on more staff to cope with the increased workload.
All of a sudden you no longer fit into the modest office space you hired for your fledgling business and you have to think about expanding. But you’ve been paying rent for over two years and it seems such a waste. And now that you think of it, you were considering selling your substantial home and moving into a lock-up-and-go townhouse. It occurs to you that perhaps you should keep the house (it’s an asset after all) and convert it into business premises. That way you’ll save on rent.
On the surface it all seems to make perfectly good business sense. Except for one thing. Your house is in a residential area and therefore not zoned for business purposes. In order to trade as a business on those premises, you will have to apply for the property to be rezoned – and the time and energy needed to achieve that may make another year’s worth of paying rent not seem so onerous after all.
If you are operating a one-person business, don’t employ staff and don’t have clients calling regularly at your premises, you don’t have to apply for business rezoning. But if you need to put up signage, expect clients, suppliers and staff, and if the property is used solely for business purposes then, in all likelihood, you’re in for a rezoning application.
The Rezoning Battle
But here’s the catch – applying for a property to be rezoned as a business in no way means that it will automatically happen. As South African cities boom with business growth and congestion becomes an ever-increasing cause of frustration and wasted time, businesses are moving out of the CBD and into what were previously residential areas.
This is a natural phenomenon of urban geography and over time, as residents realise the potential value of selling up their homes to businesses that want to move in, areas are rezoned for business. However, if an area is not yet zoned for business, the residents usually have fairly strong objections to it becoming so. Businesses generate traffic and parking problems. Local councils typically take the concerns of residents seriously and are reluctant to rezone an area for business on the strength of one application. Add this to the fact that every local authority has a different set of parameters which guides rezoning decisions – and that each application is taken on its individual merits – and the process becomes extremely complicated.
Ultimately, if you want to avoid the daily horrors of traffic and purchase your own business premises in a residential neighbourhood, your best bet is to set up shop in an area in which other businesses are already established. After all, there is strength in numbers and this greatly improves your chances of getting the area rezoned.
To apply for rezoning in an area that is not zoned for business, you have to secure a zoning scheme departure or special consent from the City Council. Getting this can take a while – in some cases up to three months. You may need to advertise your business’s intention to conduct a particular business activity in the local newspapers. Residents and other stakeholders will have the chance to respond with any complaints, which are heard by a board, before you will be granted or denied the departure. Being granted a departure usually paves the way for successful zoning approval but, once again, there are no guarantees. And all the while, you can’t operate legally as a business in that particular area.
When it comes to the legal side of setting up a business, it pays to do your homework and get professional assistance where appropriate. The cost of mistakes and bad judgement calls in this area can be severe.
Trading licences are governed by the Business Act of 1991, No. 71, which states that certain businesses require licences. These include:
- Those that sell or supply meals or perishable foodstuffs
- Those that provide certain types of health facilities or entertainment. These are defined as Turkish baths, saunas or other health baths; massage or infrared treatment; escort services (male and female); games halls that have coin- or token-operated mechanical or electrical devices or three or more snooker or billiard tables; night clubs and discothèques; cinemas and theatres, and “adult premises” as referred to in section 24 of the Films and Publications Act, 1996
- Those that hawk meals or perishable foodstuffs
How To Run Your Business Better Without The Bad Debt
Manage your debt, increase your cash flow and build a healthy, growing business with these three key steps.
Our cars run on petrol. Our bodies run on oxygen. Our businesses run on cash flow.
You can bridge cash flow gaps with smart financing, but that’s a reactive approach. This article is about making sure you never need to think about bridge financing in the first place. It’s about how to run your business better. The most common, and avoidable, reason that businesses starve without cash is simply because their customers are not paying them. In a slow economy, this becomes an even bigger problem and is a huge challenge faced by entrepreneurs.
Here are three critical areas you need to address to manage your debt better, and some actionable items to implement right now.
1. Create a payment rulebook
If you want your clients to play by the rules, and to be able to deal with rule-breakers, you first need to decide what those rules are. No, it doesn’t need to be a 300-page document, just draw up the criteria that suit your business best. By doing this, and sticking to them, you can actually create good clients, and everybody wins.
Here are the important things you (yes, you) need to decide:
Will I sell on credit?
If you can avoid credit altogether, and have a 100% cash on delivery business, then that is definitely the way to go. If you’ll lose out on business by not offering any credit whatsoever, only then does credit become an option. This seems really obvious, but many SMEs just assume that they have to operate on buy-now/pay-later. They do not.
When will someone qualify for credit?
Giving credit is all about managing risk. It’s a horrible idea to extend credit to everyone, so who will qualify for yours? Will you do formal credit assessments by checking their credit score, or calling references? The more careful you are with credit now, the less likely you are to end up in a fight later. Rather lose the client than lose the work, the money and then the client. (A suggestion: Make all new customers strictly COD for three months, after which they can get credit.)
How long will I allow customers to pay?
What is your limit. 30 days? 60 days? You need to consider if you can cover monthly expenses, buy stock and pay staff while you wait for invoices to be paid, or if late payment will hinder your ability to do more work for different clients. This will help you work out how flexible you can (literally) afford to be. Also, make sure this is clearly communicated to your clients, please.
Will I ask for a deposit?
A deposit can minimise your exposure drastically, because you are never going to lose everything in the case of a bad payer. Most businesses don’t mind paying a deposit and it’s fairly standard practice these days to insist on one prior to commencement of work.
This is a good policy to have in place for brand new customers or those with a bad credit history. Actually, it’s just a good policy.
What payment method(s) will I accept?
If you’re a retainer or service business, getting customers to sign debit orders will drastically improve your collection process. It’s automated! But if customers aren’t willing to sign debit orders, ensure that you support as many payment options as possible (like EFT, Credit Card, Zapper or GeoPayments) — the more choices they have, the higher your chances are.
Once you know the answers to these, write them down, print them out and make sure your entire business sticks to them at all times. ALL times.
2. Paperwork and systems
Systems create efficiency
Efficiency gets you paid. Below are a few basic, but critically important aspects to consider putting in place, if you haven’t already. If done correctly they should feel more like a lifeline than a noose, holding your business up, rather than holding it back. In my experience most businesses will implement these reactively, as a way of ‘not getting burned like that again!’. But, I ask, why wait?
On the ‘same page’
Will you have a simple agreement, clearly setting out the terms for your engagement, that you get signed before taking on a new client? Or are you happy to rely on emails, orders or even WhatsApps for every order? Whatever you decide, make sure it’s enough to protect you if things turn sour. You can’t prove a telephone conversation, in which you agreed terms, in court… The additional benefit of a more formal agreement is that it creates (in black and white) a platform of mutual understanding between you and your clients, and will help avoid heaps of grey-area issues down the line.
A system of accounting
Who owes you money? When do they owe it by? Who is late? Who is really, really late? These are questions you should be able to answer daily, and the only way to do that is to put a decent accounting system into place so you can convert invoices into cash. I recommend Cloud systems like Xero, Sage One or QuickBooks Online.
Related: Dealing With Debt As An Entrepreneur
Get it signed off
If you can get your customers to sign a delivery note when the goods are delivered, you will have a much stronger case if they decide not to pay… This works just as well for service businesses, where the client (via their signature) agrees that all the terms of the agreement were met, and they’re happy with the end result.
Invoice efficiently, and often
If invoicing depends on you, the SME owner, then you have to make sure you have the time to do so. I would recommend putting aside 30 minutes twice a week to recon the completed work, and send out the associated invoices. In fact, why not invoice as soon as the delivery note or approval form has been initialled? Do you have something more important to do? The quicker you invoice, the faster you will get paid and the sooner your cash flow will stop being a ‘cash slow’.
The ‘delayed payment’ is often in the details, guys… If your invoices are incomplete or inaccurate, your payment will be delayed until you rectify it — especially when dealing with bigger, more fastidious clients. Take the time and ensure that your invoice complies with the minimum requirements as set out by SARS, and your client. In most cases this includes VAT number (yours and theirs), banking details, due date and business address. If you’re not sure, ask your client what they require on their invoices (they will change from business to business). Something as simple as getting these details right could shave weeks off the payment time.
The more persistent you are (within reason), the more likely you are to get paid. With today’s technology you can do this automatically, reminding your clients to pay their bill with a text message, email or alert. Heck, even a phone call a day or two before the invoice is due can ensure they don’t forget, and your due is front of mind. When payment day rolls around the supplier who is on top of their collections will probably be paid first. It would be nice if that was you.
3. And then if they don’t pay…
When customers’ accounts fall into arrears, it’s your job to do something about it. It’s also a good idea to do that something as soon as humanly possible. It’s not annoying. It’s not nagging. It’s business, and you are not their bank. It’s the fulfilment of the contract into which you and your client entered.
Until you get a specific payment date, follow up every day. Trust me, if they get annoyed with you chasing the money that they owe you, you do not want them as a client any longer, so there’s nothing to lose. When you get a resolution date, make sure you remind them via a call or an email the day before it’s due. Help them to help themselves.
And if all your attempts fail, then sometimes a little lawyer’s letter is all you’ll need to open their wallets. If you don’t, you’re letting them steal from you. If you do, you’ll thank your lucky stars for all the systems and processes you put in place.
It doesn’t matter how much money you have on paper. What matters is how much you have in the bank. It doesn’t matter who owes you, it matters who pays you. You can’t run a business on promises. Ask anyone who’s ever tried.
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Alan Answers: Do You Understand The Basics Of Attracting Attention?
Whether you want to be a public speaker, find an investor or land a big sponsorship deal, the secret lies in how well you can tell your story.
I have always wanted to be a public speaker yet I’m very anxious about crowds and my public speaking is rudimentary at best. What should I do? — Lwazi
I was a terrible public speaker. I sometimes still am terrible. But I’m much better than I used to be. The way I got better was twofold. First, I’ve done hundreds of speeches, many of which were very embarrassing. The result is that I’ve overcome my fear of embarrassment (I’m still alive, turns out public humiliation is not fatal), and I developed confidence in speaking to crowds. Second, I read lots of books on speaking, including Thank You for Arguing by Jay Heinrichs.
My main takeaways from books are as follows:
- Tell a story. People love a story.
- Don’t read it. The easiest way to lose the crowd is to read your speech.
- Keep slides to a minimum.
- Have a memorable start and end. The middle is not so important.
- Dress the part. Act the part. Don’t sabotage your speech by dressing sloppily. Put your shoulders back. Look confident.
- Have a rational argument. Appeal to the logic of a situation.
- Give background on yourself to establish your credibility. The medium is the message (read Marshall McLuhan)
- Pull on the heart strings. Appeal to the audience’s emotions. Make folks laugh. They may forget what you said; they’ll never forget how you made them feel.
Public speaking is like swimming. Knowing the theory won’t stop you from drowning. You have to practice, practice, practice. You have to embarrass yourself regularly so you can overcome the fear of embarrassment. I’m told that Toastmasters is a brilliant organisation for practising in a safe environment.
On a side note, all of the above tips are important for entrepreneurs and sales people as well: After all, selling your business as a start-up is selling yourself, and the best way to do that is with a great story.
How do I convince someone to invest in my business? — Anonymous
The first thing an investor wants to know is how you’re going to make money. Theories are not really useful. Ideally, you need to show a proven revenue model that can believably be scaled to ensure that you generate more money than you spend.
The second thing most investors want is to know that you’re on a rising tide. Photo shops are not on a rising tide. No matter how well you run your photo shop, you are doomed to be taken out to sea where you will drown and/or be eaten by sharks along with everyone else.
The third thing that most investors want to know is that you’ve already made mistakes with other people’s money. Better you earn your school fees on someone else’s dime. Don’t shy away from the setbacks you’ve had. Admit to mistakes, elaborate on lessons learnt. You can be forgiven for almost any business failure, as long as your integrity is not questioned.
How do I find sponsors for an event? — Stephanie
Before you approach sponsors, first define your event’s audience. Make a list of potential sponsors who share that audience. For example, if you are hosting an entrepreneur event, think of companies that target entrepreneurs.
Once you have written down all the company names, start mining your personal network for anyone who works in one of those companies. You need to get to the CEO.
Sometimes a marketing director or executive is sufficient, but most times, especially if speed is essential, the CEO is the only person that won’t waste your time.
Be sure to use LinkedIn to explore relationships that people you know have in the companies. Maybe a friend of yours knows the CEO. The quality of an introduction via a mutually trusted friend is not far removed from a personal direct relationship.
Related: How do I start an events company?
Create a simple pitch deck. Be sure to include in the deck the benefits for the sponsor. No one really cares about the benefits for the audience, or for you, the organiser. Think about who is writing the cheque, that’s who you’re selling to.
Always give potential customers three options. People want options. Not too many to confuse, three is the magic number. The middle option should be the package you prefer the sponsor to choose. Most people choose the middle option.
Once that’s all done, start pitching. Do whatever it takes to get in front of the CEO. Then sell your dream. Don’t stress if you’re rejected. ‘No’ is better than ‘maybe.’ It saves you wasted time. Keep moving until someone bites, then stop moving and close the deal.
Listen to this
Alan’s audible book Be a Hero: Make Life an Adventure is now available on amazon.com and Audible.com
Read by Alan himself, Be a Hero is a collection of stories on how to make your life an adventure by changing your mindset and tackling adversity.
Go to amazon.com or audible.com to download your copy. Be a Hero is also available in Kindle and paperback through Amazon.com.
Read ‘Be A Hero’ today